Question

Loring Company incured the following costs last year:
Direct Materials	$216,000
Factory Rent	24,000
Direct Labor	120,000
Factory Utilities	6,300
Supervision in the factory	50,000
Indirect labor in the factory	30,000
Depreciation on factory equipment	9,000
Sales commissions	27,000
Sales salaries	65,000
Advertising	37,000
Depreciation on the headquarters building	10,000
Salary of the corporate receptionist	30,000
Other administrative costs	175,000
Salary of the factory receptionist	28,000
Required:
1. Classify each of the costs using the following table format in excel spread sheet. Be sure to total the amount in each column.
Example: Direct materials, $216,000.
2. What was the total product cost for last year?
3. What was the total period cost for last year?
4. If 30,000 units were produced last year, what was the unit product cost?

Answer 1

Product cost includes direct material cost, direct labor cost and manufacturing overhead cost. It involves all expenses that are related to manufacturing operations.

Period cost includes costs other than product costs

.

			Question 1	Question 2	Question 3
	Amount		Product cost (or) period cost	Total Product cost	Total Period Cost
Direct Materials	$216,000		Product cost	$216,000
Factory Rent	$24,000	Manufacturing overhead	Product cost	$24,000
Direct Labor	$120,000		Product cost	$120,000
Factory Utilities	$6,300	Manufacturing overhead	Product cost	$6,300
Supervision in the factory	$50,000	Manufacturing overhead	Product cost	$50,000
Indirect labor in the factory	$30,000	Manufacturing overhead	Product cost	$30,000
Depreciation on factory equipment	$9,000	Manufacturing overhead	Product cost	$9,000
Sales commissions	$27,000		Period cost		$27,000
Sales salaries	$65,000		Period cost		$65,000
Advertising	$37,000		Period cost		$37,000
Depreciation on the headquarters building	$10,000		Period cost		$10,000
Salary of the corporate receptionist	$30,000		Period cost		$30,000
Other administrative costs	$175,000		Period cost		$175,000
Salary of the factory receptionist	$28,000	Manufacturing overhead	Product cost	$28,000
	$827,300			$483,300	$344,000

.

4. If 30,000 units were produced last year, what was the unit product cost?

Total product cost   = $483,300

Number of units produced = 30,000 units

Unit product cost = Total product cost ÷ Number of units produced

= $483,300 ÷ 30,000    = $16.11 per unit